CHICAGO, April 13 /PRNewswire/ -- Cross-border mergers and acquisitions activity fell by 37 percent compared to the same period in 1992, according to KPMG, the international accountants and consultants. KPMG's Deal Watch survey reported that the value of cross-border acquisitions worldwide was $11.6 billion in the first three months of 1993, compared with $18.3 billion in 1992. The survey recorded 372 transactions in the first three months of 1993 compared with 569 for the same period last year.
The two largest deals announced in the first quarter involving United States companies were:
Bidder Target Industry $Million
RTZ(UK) Nerco(USA) Coal Mining 1,162
Bowater(UK) Specialty Coatings Coatings for films
International (USA) and paper 434
In addition, worldwide cross-border acquisitions were down 28 percent, compared to the last quarter of 1992. "This is not all that surprising," said Lenz Neuhauser, KPMG's National M&A Director in Chicago. "We frequently see and often expect the first quarter statistics to be less than the last quarter of the preceding year. There is significant pressure to finalize deals prior to year end." But Neuhauser claims that making the deal before year end is not the only reason for the decline. "Political and economic circumstances, especially in Europe, have contributed to the fall this year."
North American and British Purchases Increase
Overall, both British and North American cross-border M&A was on the increase in the first quarter of 1993, according to the KPMG Deal Watch statistics. However, United States purchases fell slightly matching $1.9 billion in the first three months of 1992 to $1.7 billion in 1993. For North America, Canadian cross-border purchases in the first three months of 1993 more than made up for this fall, with 18 acquisitions valued at $997 million -- that is 3-1/2 times greater than the $278 million (17 deals) recorded by KPMG in the same period in 1992. United Kingdom cross-border purchases rose by more than 147 percent, from $1.9 billion (92 deals) in the first three months of 1992 to $4.7 billion (80 deals) in 1993.
According to Neuhauser, "These nations were the first into the recession and are showing that they will be the first out, as they appear to be the first to recover from the M&A slump. The United States and Canada have seen growth in both industrial production and Gross Domestic Product in the last three months and in the last year." Neuhauser commented that these are indicators of increased confidence in cross-border buying. "The economic statistics show that recovery in the United Kingdom is not as stable, commented Neuhauser. "Based on their foreign purchases, however, British businesses see the economic climate improving rather than continuing the decline of the past few years."
French and Italian Acquisitions Fall Hard
French acquisitions fell most, from 72 deals valued at $7.2 billion in the first three months of 1992 to 40 deals valued at $410 million in the same period in 1993. (The 1992 figures included two billion-dollar deals: Alcatel Alsthom's $3.7 billion buyout of ITT's share in their joint venture, Alcatel NV, and Elf Aquitaine's $3.1 billion acquisition of the Minol/Leuna petrol filling stations and oil refinery in former East Germany.) Italian acquisitions also fell heavily, from 37 deals valued at $1 billion to 12 transactions for which low values were disclosed.
"The battle to maintain the French franc's exchange rate has kept real interest rates in France at over 9 percent," Neuhauser added. "The reduction in French purchasing is understandable in light of such high financing costs." High interest rates in France have not deterred foreign buyers from acquiring French companies. However, cross-border sales of French companies rose 84 percent in value to $1.7 billion (32 deals) in the first three months of 1993 compared to $925 million (64 deals) in the same period in 1992. KPMG expects this trend to continue.
The ever-widening scope of investigations into political and business corruption in Italy has undoubtedly played a part in the decline in cross-border purchases by Italian companies, according to Neuhauser. "The uncertainties of the current climate will continue to inhibit Italian companies from committing themselves to large-scale foreign expansion. And there are additional challenges in uncovering what fiscal measures the government will adopt to solve the country's deficit problem."
Through 135 offices in the United States, KPMG Peat Marwick provides industry-specific accounting, taxation and consulting services to a broad range of businesses and other organizations in the financial, commercial and service sectors. The worldwide KPMG network has more than 76,000 people operating in 125 countries.